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Making Headlines

General Pinochet, Nick Leeson and Ian Maxwell are all former clients.

More recently, Rebekah Brooks and UBS rogue trader Kweku Adoboli have called in Kingsley Napley for help. LB speaks to managing partner Linda Woolley about a firm where the clients make the front pages.

The reception area at Kingsley Napley’s offices in Clerkenwell very much reflects the character of the firm. It’s small, but big enough to serve its purpose. It lacks the ostentation of many City rivals but isn’t too Spartan either. In fact, it’s just about right. Kingsley Napley hasn’t gone for the wow factor, which is probably just as well. Unlike some of its larger City neighbours, many of the firm’s most high-profile clients won’t ever step foot inside its office.

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Under the Weather

When US outfit Orrick, Herrington & Sutcliffe entered the London market in 1998, chairman Ralph Baxter had a dream of competing on the global stage.

But 13 years on, that dream looks to be souring. LB investigates what is going wrong.

Orrick, Herrington & Sutcliffe was once seen as one of the most successful and promising US firms resident in London. Achieving rapid growth and performing well financially, it seemed that nothing could go wrong. But a string of departures since the start of 2010 and a lack of strategic direction has left many asking if chairman Ralph Baxter’s sheen has come off. Added to the mix is the reputational damage done by its involvement in at least two very public and ultimately failed merger talks with SJ Berwin and Akin Gump Strauss Hauer & Feld. Orrick does not look like the unmitigated success story it purports to be.

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Power Surge

Energy clients are dictating law firms’ strategic direction and hiring policies. For now at least, energy is king. LB finds out why.

On the last day of August ExxonMobil dominated the business pages, when news broke of its $3.2bn Arctic exploration deal with Russian state-owned oil giant Rosneft. The story surprised energy specialists – a similar deal between BP and Rosneft was previously scuppered by TNK-BP, the partners in BP’s existing joint venture in Russia. The UK oil major suffered a double hit that day, when it was revealed that bailiffs had raided its offices in Moscow, linked to a case brought by TNK-BP shareholders over the failed Arctic deal with Rosneft.

These events attracted significant media attention, not just for the energy companies concerned but also the law firms involved. Freshfields Bruckhaus Deringer, which ironically advised BP on its failed deal with Rosneft, was now advising Rosneft in the deal with ExxonMobil. Skadden, Arps, Slate, Meagher & Flom and Akin Gump Strauss Hauer & Feld was advising the US oil major.

Deals and (more often than not) disputes between the energy giants and local incumbents have attracted significant interest in the press in recent years but it is also an inescapable fact that clients of the energy practices at some of the world’s largest law firms have dictated global growth strategies.

 

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BLP – Ten years gone

Berwin Leighton Paisner is a decade old this year, a period marked by impressive financials, a revolving door of partners and tentative international expansion. LB assesses the firm ahead of its difficult teenage years.

Berwin Leighton Paisner (BLP) managing partner Neville Eisenberg is impeccably well prepared for our meeting. Next to his black coffee he has printed e-mails and details of the firm’s financials over the past ten years. In his soft South African brogue, his responses are polished and littered with management-speak. He gives nothing away. But one question gives him pause – when asked if he will stand for re-election next year, he hesitates before answering cautiously: ‘Obviously I’m thinking about it.’ However, he says it’s still early days.

 

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City 50 – City Break

With a few years of pain behind them, City 50 firms are feeling better. But is it still too early to bring out the champagne?

Previous concerns that London’s place on the global financial stage could be eroded seem to have been forgotten this year. While the UK economy is still in a state of flux, the capital has maintained its standing as one of the world’s leading financial centres, adding some confidence to the majority of the industry’s leading law firms. Average London revenue across the 50 largest firms in the capital fell by just 4% during 2009/10. Still feeling the aftershocks of the global financial crisis, the numbers made for tough reading. But after a more stable period, in part thanks to some canny management, an increase in litigation mandates, a recovering corporate market and a rise in financial work, the landscape doesn’tlook too bad. This year, City 50 firms saw revenues remain flat compared with last year. And while London offices continue to contribute less to international firms’ global turnover, there were still some impressive performances.

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Wish you were here?

This year’s Legal Business 100 firms continue to grow in revenue, but how much is performance in foreign markets masking woes at home? LB finds out

Things have changed in the Legal Business 100 this year. At least seven firms have merged with others, either overseas or at home, while another three have bolted on chunks of the now extinct Halliwells. Five of these firms have seen superficial revenue rises as a result of consolidation, while it is impossible to analyse the fee income ebb and flow at Norton Rose and Hogan Lovells because of recently completed mergers.

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Mergers – Answers on a postcard

Despite much hype over mid-market consolidation recently, the number of mergers between law firms in the UK has been modest. LB discovers why not every struggling firm is looking for a tie-up

If you were to slap an ‘at risk’ sign on any segment of firms in the LB100 then it would have to go somewhere on that diverse group of City firms that pull in between £20m and £70m in turnover. The list of threats to their businesses is growing. From pricing pressures in a crowded market to a lack of differentiation and a stagnant transactional market, there is much to think about. ‘If you’re not growing turnover now, you’re not going anywhere nice,’ one commentator suggests.

 

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Global Elite – Scaling up

With an unerring consistency, the UK Global Elite has maintained its grip on the market throughout the recession and 2010/11 was no different. Some will have hoped that the global law firm may become an endangered beast, but if anything the last few years have made them stronger.

While it hasn’t been easy for the global giants, there has been a fair bit of soul searching, cost cutting and re-jigging of business plans, which has resulted in this group of six firms holding tight to a 36% market share of the entire LB100.

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Major International – Wedding Bells

In comes a new peer group to the Legal Business 100. Thanks to a flurry of transatlantic marriages over the past 18 months, it is no longer appropriate to sit the likes of DLA Piper, Hogan Lovells, Norton Rose, SNR Denton and Squire Sanders Hammonds in their old peer groups.

Take DLA Piper. Historically the firm has never been judged on the basis of its global business in the LB100 because the firm operates a Swiss verein structure with two separate profit pools and, up until now, it probably wasn’t appropriate to do so. Of this group DLA was the forerunner in terms of US ambition when it moved into the market, pulling off a three-way deal with Chicago firm Piper Rudnick and Californian firm Gray Cary Ware & Freidenrich in 2005.

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Major City – Bits and pieces

Many of the firms in the Major City group will look back on 2010/11 with mixed feelings. Some firms will feel a sense of relief that, broadly speaking, any further disasters were averted but others will be frustrated that key transactional markets refused to pick up significantly. Strategically, however, there are still a couple of firms in the group that have to ask themselves some difficult questions over the coming year.

The peer group has changed somewhat since last time around, with Hogan Lovells and SNR Denton, as a result of transatlantic mergers, moving to the newly created Major International group.

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London Midsizers – Steady As She Goes

London’s Midsizer legal landscape looks a little different this year. Field Fisher Waterhouse and Withers move into the Major City ranks, each with revenue surpassing £90m, establishing them as major forces in the City.

More impressive, however, is the entrance of litigation boutique Stewarts Law into the LB100 this year. And what an entrance it is. One of the standout performers across the whole table, the firm has had a bumper year.

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Insurance – Insuring the Future

This year was all about the urge to merge and this time next year the Insurance group will look very different, with two firms missing after a period of consolidation among the Insurance group.

Davies Arnold Cooper will be transformed after its November merger with rival Beachcroft goes live to create DAC Beachcroft. Meanwhile Clyde & Co and Barlow Lyde & Gilbert are set to combine to create the largest firm in this peer group. When the two merge later this year, they’ll become a £307m behemoth, nearly treble the size of nearest competitor Holman Fenwick Willan.

The flurry of tie-ups is partly due to major shifts in the insurance market over the past few years, with a number of large insurers squeezed after a spate of man-made and natural disasters.

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Major UK – Major Overhaul

In tearing up the rulebook in this year’s Legal Business 100, this peer group has changed radically to reflect the global transformation of some firms and the increased national profile of others.

To our new Major International peer group (see page 84) moves global giant DLA Piper – whose presence in the Major UK group, contrasting with firms such as Burges Salmon, was always incongruous – and Squire Sanders Hammonds which, following a major transatlantic merger, can no longer be considered just a national UK firm.

 

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South – South End

The wind blowing up from the south region has the familiar whiff of stagnant revenues again this year. As was the case in 2010, more than half the firms in this peer group have posted negative or flat turnover growth, a sure sign that market conditions are taking their toll in this fiercely competitive market. These firms are perhaps suffering more than most, largely because competitive pricing pressure on London-based firms means that those south of the capital can no longer merely compete on price – they have to match London rivals for quality as well.

The averages for this peer group remain among the lowest of any peer group in the LB100. However, these figures look less concerning now that some of the larger grossing law firms in other peer groups have moved out to the Major UK group. That said, not one of the South firms has revenues anywhere close to £60m, which is what the top regional firms have traditionally been pulling in.

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Central – Stuck in the Middle

The absence of this peer group’s two leading performers, Mills & Reeve and Gateley, has seen averages for the Central region take on a distinctly ‘average’ hue. The region is now officially the worst performing peer group in the LB100 in revenue terms, a wooden spoon that it inherited last year from the South group and has secured once more in 2011.

The simple fact is that the majority of the firms that have Major UK status dominate this region of the market. Strip them away and what’s left behind are firms that are surviving on scraps.

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North – Northern Echo

The struggle continues. While the North peer group maintains its position and outperforms other regions, average revenue has grown marginally with the departure of DWF and Hill Dickinson, which have joined the Major UK firms group (see page 94). In last year’s review, these firms were £15m and £21m respectively ahead of the rest of the pack, and this year sees the gulf between the haves and the have-nots widen even further.

Weightmans is now the largest firm in the North group by revenue, and this lead will increase in 2012 when its recent acquisitive spree is taken into account. This year the firm added 200 staff through the acquisition of Vizards Wyeth’s London insurance team and its 1 May merger with Liverpool firm Mace & Jones.

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Scotland – Scots Guards

This year we’ve broken the Scottish Big Four up. Most likely to the chagrin of Maclay Murray & Spens and Shepherd and Wedderburn, rival firms McGrigors and Dundas & Wilson have joined the Major UK group by virtue of national coverage, reputation and having revenues of over £60m.

While in terms of market share and quality, the Big Four are still regarded as one competitive unit, and all firms have significant businesses operating throughout the UK, Maclays’ turnover of £48.6m is some way behind that of D&W’s £62m.

 

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Diversity – Bridging the Gap

Scan the figures from this year’s Legal Business 100 survey and it seems that little has changed when it comes to gender diversity in the non-equity and equity partner ranks. Of the 7,376 equity partners across the UK’s 100 largest law firms by revenue, in 2010/11 just 17% of all equity partners are female. Similarly, just 23% of the 13,317 total partners are female.

This statistic has hardly altered in the last six years. In 2005, information gathered for the LB100 showed that just 15% of equity partners were women. After the numbers were crunched, it meant on average nine out of 66 equity partners were female.

But go back another 20 years, and this number is a significant improvement from the days when only 20 women made it into the equity at the ten largest City firms combined.

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